The Employee Retirement Income Security Act of 1974 (ERISA) section 404(c) offers plan sponsors and other fiduciaries protection from liability for losses resulting from participants’ direction of their investments. To take advantage of ERISA 404(c), the plan must meet investment, administrative and disclosure requirements.


Investment Menu: ERISA 404(c) states that retirement plans must offer a broad range of investment options. In an ERISA 404(c) compliant plan, the participants have a choice of at least three investment options with varying risk/return characteristics and can view and manage their investments. The Plan must also have at least one Qualified Default Investment Alternative (QDIA). 

A QDIA is a default investment used when money is contributed to an employee’s 401(k) account, but the employee has not made their investment election. That money is automatically invested into the QDIA – a fund that meets strict criteria specified by the Department of Labor (DOL). Learn more here: 

Plan Design and Administration: Plan sponsors and fiduciaries must also give participants sufficient opportunity to direct the investment of their account. Participants must be able to transfer in and out of each core investment option at least quarterly. If there are investments with higher volatility, more frequent opportunities to make investment changes may be required. To ensure ERISA 404(c) is being satisfied, there must be an identified plan fiduciary who is responsible for ensuring that participant investment instructions are properly processed. 

Required Notification and Disclosure: To satisfy these requirements, Plan sponsors should provide notification to participants that it intends to comply with 404(c) and that plan fiduciaries are not liable for any losses resulting from participant direction of their investments. Detailed descriptions of each investment option should be provided to the participants.